Sky High Rates And No Rooms: Who Is The Ultimate Loser?

Opinionated

K V Simon

Since the last couple of years the Indian hospitality industry has been boasting of enjoying high ARRs and high occupancies. While it is good as far as business is concerned, I wonder if it really is a good situation to be in in the long run? Every other industry, for example aviation, automobile (hospitality’s kith and kin) has been doing their bit to expand capacity, reduce prices and harness enhanced market opportunities.

However, the Indian hospitality industry has been turning its back on customers. If there are no rooms, it is a sure sign of lack of vision, lack of quality leadership and absence of strategic long-term thinking in the industry. This short-sightedness, exploitative pricing strategies and refusal to invest and expand inventory, etc will backfire on the industry. Smart entrepreneurs and operators in other industries will develop alternate ways and means of meeting the challenge of shortage and high prices.

The Indian hospitality industry is still obsessed with the five-star product, investing a crore per room, wanting to take USD 300 per day. This is a ridiculous situation in a country like India which has millions of middle-class customers with a buying power of USD 20 - USD 80 per day rooms in thousands. Low labour costs and availability of professionally trained manpower should definitely be a strong incentive to invest in low and mid-priced hotel rooms.

Building pyramids with a large and strong base with a variety of mass market products will always be a sound strategy for any industry. Building on international business, ignoring the domestic market could be injurious in the long run. Even the international market is sensitive to factors like price and inventory.

If the Indian hospitality industry wishes to have sustained prosperity and long life, it must become proactive in investing and developing a range of hotel inventory. The industry leaders must make serious efforts in getting market and investment intelligence which will provide demand forecasts and foster product development in time. With a minimum of two to three years lead time for even a very small hotel project, it is important that Indian hospitality industry invests in capacity expansion based on demand forecasts for another 20 years.

The private sector often tends to blame the government in being behind time, whereas the Indian hospitality industry is a classic example of being behind at least by a decade in seizing opportunity and meeting demands. A million hotel rooms within the next 10 years will not be an exaggeration. It seems that the Indian hospitality industry will not wake up unless shaken by some external factors.

It would be wise to do right things when times are good. When customers knock at your door, and you say, ‘No Room’, you are turning your back on them. A time may come, when you may have plenty of rooms, but no customers willing to turn to you. The key to success in hospitality industry is to give the customer what he needs, where he needs, when he needs and the price he is willing to pay. In this respect, Indian hospitality industry’s performance is much wanting.

(The author is regional vice-president of the Educational Institute of American Hotel & Lodging Association (EI-AH&LA) and is based in Mumbai)